Option Investor

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A flag is a continuation pattern. This pattern is formed as the market or a stock trends higher and we see evidence of some gradual profit taking. Because it is gradual, we will see small counter moves emerge on a chart during the periods of profit taking. Once we see the profit taking end, we will generally see the previous trend re-emerge as the bulls retake their long position and we see new bulls move in, as a result of the new and more attractive price level.